Why startups should never be your target market

I have a confession. I love our customers but, in general, I hate startups. You shouldn’t start, join, or try to build a business that targets them. The startup world feels more like a deafening echo-chamber of self promoting “house flippers” more interested in vanity metrics and celebrity status on lame tech blogs than building a business.

The best presentation about startups in the last two years was by Dave McClure who BEGGED everyone in the room to keep their jobs. The picture he paints is 100% accurate. This is my companion piece about why you shouldn’t be building a business for startups.

1. They have no money. Spending $20 a month feels like a crime. Most of them can’t afford to pay employees properly so why would they use their limited funds on you? You’ll need to work twice as hard to earn it.

2. They make irrational tradeoffs.Because of #1 most startups choose build over buy. They ignore the cost of support, maintenance, distraction, and everything else to save a few bucks. Here’s a tip to any startup that hesitates spending money on excellent products like KissMetrics, UserVoice, or KickoffLabs…

$20-50 a month isn’t what’s keeping you from being a profitable business. When you look at your numbers start factoring in your own salaries. I don’t care if you aren’t paying yourself yet. You aren’t truly profitable until you are “latte profitable”. Does what you are building pay you more than the barista serving your latte makes per year?

I’m not saying you go hog wild and spend like you stole that credit card… just realize that your time has value. Don’t waste it hacking up your own solutions when $20.month lets you get back to work on your core value props.

3. They think their idea is unique.Because of this they are scared to tell their own mothers what they are up to. Let alone conduct reasonable business with someone else. KickoffLabs has given me insight into thousands of startup ideas. Repeat after me…

There is no point in that NDA and your super stealthy launch page. Just come right out and say

“I’m doing X and it’s going to be better at Y than any competition. “

It will do wonders for your conversion rate and early traction.

4. They don’t know what they are building. You can’t sell consistently to them because their own direction is going to change every month. It may not seem like it, but Scott and I have changed direction several times and tend to avoid long term commitments/contracts.

5. The market is tiny. In your echo chamber it may feel like everyone and their cousin Eddie has a startup… but they don’t. Most startup events are filled with wantrepreneurs that are appropriately scared to make the leap. It’s a terrible niche you should avoid at all costs.

6. They make for terrible customers. Because they think they could be running a business 10x your size they are pretty sure they know what’s best for you, your product, and your other customers. This makes them demanding, impatient, and hard to please. I know this because I pity the folks that have Scott and I as customers. :)

7. The minority ruin it for the majority.I hate going to startup events. I like 7 out of 10 people I meet, but there is that last 30% comprised of wannabe’s, name droppers, and blowhards that love criticism for the sake of hearing their own voice. It drives me batty. That’s why I prefer having 1:1 coffee conversations with other reasonable founders.

8. They don’t represent the real world. Or ANY other target customer. They are the definition of early adopter. They gambled their lives on an idea that may be years in the making. You can’t use their feedback. It’s easy to get because they love to try new things and give it… but it won’t help you improve the experience for the other 99.9% of the word. What they think is simple and boring is still incredibly complex for everyone else.

9. A “startup” is not a business. I tend to hate the word “startup” in most contexts. I hate that people say “I’m building a startup”. Really? Wouldn’t you rather be building a business? The startup world, itself, is an echo-chamber that focusses on hype over progress and vanity metrics over revenue.

10. They are bat-shit crazy. They have to be. Something had to be off in their heads to have escaped what everyone else expected of them in their lives. Who in their right might jumps out of an airplane like that? And you want to have these people as customers?

So….

These are just some of the reasons KickoffLabs isn’t built for startups. We’re built for people that are truly interested in building a business. That’s why I love our customers. I can always tell the difference between a startup and a business. Startups should go use a free alternative… you get what you pay for.

Once the startups have been weeded out I love the excitement of hearing about ideas that have a real market potential. It’s invigorating and motivating. The people that are left give great feedback and have been an absolute pleasure to serve in 2011. I’m filled with hope that 2012 will be a great growth year for every new business. If a few “startups” crash and burn along the way because they weren’t building a real business… I won’t be crying.

A landing page could be used for any reason. Some of our customers use a dedicated page just to make their newsletter signup prettier. But otherwise they aren’t even a startup. Some are brick and mortar stores that are coming soon. Some are tech startups that just want a high quality branded placeholder.

But my point isn’t about the pages… it’s about the business mentality that so many startups have that goes something like:

1. Idea
2. ?
3. Millions of users
4. ?
5. Profit

Where they don’t fill in the ? with things that will generate revenue. And if they do fill in the ? with a plan it’s generally such an unrealistic plan that involves 3-4 hockey sticks that it can’t be relied upon. The goal is to sell to investors not to customers.

While startups that focus on customers AND revenue from day one don’t get the attention they deserve. The media loves to talk about big investment dollars and bets made by people playing lottery tickets. Sure. 1 in 1,000 may turn out huge. But the hype generated perpetuates that cycle and generates more startups entering the lottery.

The mentality of folks in the lottery bucket, however, is that they want to keep costs as low as possible because they are waiting for some mythical hockey stick that may never come.

I agree with so many things in this post – I swim in a pool with hundreds of sharks selling the exact same things, so I have to do it very differently. Trying different ideas is fun.. and I’m constantly changing direction. It took a few years to realize that I shouldn’t be following the herd – those “SEO gurus” are very seductive but in the end are only very good at selling themselves ;)